Find the total current market value of firm debt

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Reference no: EM1370499

In order to accurately assess the capital structure of a firm, it is necessary to convert its balance sheet figures to a market value basis. KJM Company's balance sheet as of today,
June 4, 2006, is as follows:

Long-term debt (bonds, at par) $10,000,000
Preferred stock 2,000,000
Common stock ($10 par) 10,000,000
Retained earnings 4,000,000
Total debt and equity $26,000,000

The bonds have a 4 percent coupon rate, payable semiannually, and a par value of $1,000. They mature on June 4, 2016. The yield to maturity is 12 percent, so the bonds now sell below par.

What is the total current market value of the firm's debt?

Reference no: EM1370499

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